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TIR 02-22: Mandatory Electronic Filing

Recent legislation amending G.L. c. 62C, § 5 authorizes the Commissioner of Revenue to specify the method of filing tax returns and other documents. The legislation gives the Commissioner authority to require that any return, document or tax payment be "filed with or transmitted to the commissioner in such manner, format and medium as the commissioner shall from time to time prescribe ..." G.L. c. 62C, § 5, as amended by c. 300 of the Acts of 2002, § 8, approved August 30, 2002. With this Technical Information Release (TIR), the Commissioner begins to exercise that authority to require employers, operators, and vendors collecting taxes above certain annual thresholds to file their returns and pay their taxes by electronic means for tax returns due on or after January 1, 2003.

For purposes of this TIR, these terms shall be defined as follows:

Electronic means: the use of a computer, internet, touch-tone telephone, or any other electronic submission of data compatible with the Massachusetts Department of Revenue's equipment and facilities, to transmit return or document information in a manner prescribed by the Commissioner.

Filing entity: any employer or other entity required to remit wage withholding, any operator required to remit state and local room occupancy excise, or any vendor required to remit sales and use taxes.

Third party bulk filer: a person or company that collects withholding taxes from employers for the purpose of filing returns and depositing withheld taxes.

Mandatory Electronic Filing for Employers, Operators and Vendors

Filing Entities affected by Electronic Filing Requirement

Filing returns and documents by electronic means is required of filing entities that remit one or more of the following three categories of taxes: 1) wage withholding under chapter 62B; 2) state and local room occupancy excise under chapter 64G; and 3) sales and use taxes under chapters 64H and 64I, including sales taxes imposed on meals and telecommunications services. A filing entity must file all returns and documents for these taxes by electronic means (E-file) if the combined liability for the three categories of taxes for the preceding calendar year is $100,000 or more. In addition, any filing entity that remits one or more of the three categories of taxes listed above may voluntarily file electronically, even if the total annual amount remitted is below the $100,000 threshold.

Once a filing entity's tax liability reaches the $100,000 threshold in one taxable year, the filing entity must E-file in all subsequent years regardless of the amount due, as long as it has an obligation to file one of the three categories of taxes in Massachusetts. A filing entity that E-files for any one tax type must E-file for all of the filing entity's additional tax types for which the Department can accommodate electronic filing. Filing entities using a payroll processing service that E-files wage withholding returns and payments are not, however, required to E-file room occupancy and sales and use tax returns and documents unless their combined liability for the three categories of taxes reaches the $100,000 threshold. Filing entities that E-file voluntarily even though their tax liability does not exceed $100,000 may choose not to E-file in subsequent years, so long as their combined liability for the three categories of taxes is below the threshold.

This E-file requirement modifies the Electronic Funds Transfer (EFT) requirement, imposed under G.L. c. 62C, § 85 and 830 CMR 62C.78.1, that taxes above a certain threshold must be paid via electronic funds transfer. Any taxpayer required to file electronic returns or documents under this TIR is also required to participate in the EFT program. The thresholds for withholding and sales and use tax liabilities established under the regulation are hereby lowered to the $100,000 threshold announced above. The regulation permits expansion of the EFT program by providing that "any further expansion of the EFT program will be announced in advance by Technical Information Release (TIR) or other Department of Revenue public written statement." 830 CMR 62C.78.1(3)(b)(5).

Filing Requirements

An E-filed return or report shall be timely filed if electronically submitted on or before the due date. The confirmation number and confirmation time-and-date stamp received by the filing entity following electronic filing constitute the substantiating date mark providing proof of the filing date.

If there is any change in a taxpayer's electronically filed tax information, the taxpayer must file an amended tax return. Until June 30, 2003, such amended tax returns and abatement applications must be submitted following existing paper procedures. As of July 1, 2003, such amended tax returns and abatement applications must be filed by electronic means. See 830 CMR 62C.37.1.

If a filing entity required to file by electronic means does not do so for any tax required to be filed electronically, the failure to so file shall be deemed a failure to file, unless the failure to file electronically is due to breakdown of the systems or equipment at the Department of Revenue, or other circumstances under which the commissioner may exercise discretion to waive penalties. If, despite its best efforts, a filing entity has difficulty in its transition from paper to E-file returns, the filing entity should contact the Department's Customer Service Bureau at (617) 887-MDOR or toll-free in Massachusetts at (800) 392-6089 to inquire about the process for a waiver of penalties. Effective for returns due on or after January 1, 2003, filing entities required to file electronically will no longer be permitted to satisfy their filing requirements by filing paper returns. All administrative rules regarding tax returns and documents, including deadlines and penalties, shall apply to those submitted by electronic means.

E-file registration

A filing entity must register for the E-file program, for either mandatory or voluntary participation. The registration procedure can be found at the . To begin the registration process, the filing entity's contact person will enter the entity's Federal Identification Number (FID) and click on the "Log In" button. The contact person will be prompted to provide the entity's address, telephone number, fax number, tax type or types, and certain banking information as well as certain optional information. The contact person will also be asked to provide his or her first and last name and social security number. The Department will confirm the information provided and will mail, within approximately ten days, a Personal Identification Number (PIN) to the filing entity. Once the filing entity has received a PIN, it is registered and may file and pay taxes electronically using Webfile for Business at the Department's secure web site by entering its FID number and PIN. Filing entities may also file withholding returns electronically using Webfile for Employers. Other means of electronic filing may be developed in the future. Electronic means of filing shall replace paper forms (except amended returns and abatement applications filed prior to July 1, 2003). Filing entities may contact the Department at 617-887-MDOR or toll-free in Massachusetts at 1-800-392-6089 for further information.

Third Party Bulk Filers

This TIR announces a six-month pilot program beginning January 1, 2003, permitting selected third party bulk filers that annually submit wage withholding returns and payments on behalf of more than ten employers to file electronically. The Department anticipates requiring all third party bulk filers that submitted wage withholding returns and payments on behalf of more than ten employers in the previous calendar year to E-file all returns due on or after July 1, 2003. All payments by third party bulk filers that E-file must be made using an Automated Clearing House. The Department will individually contact those third party bulk filers eligible to participate in the pilot. The E-file program for third party bulk filers will be described more fully in a forthcoming public written statement.

Zero Returns

This TIR also announces that as of July 1, 2003, all filing entities that remit wage withholding under chapter 62B, state and local room occupancy excise under chapter 64G, and sales and use taxes under chapters 64H and 64I, including sales taxes imposed on meals and telecommunications services, must submit required returns and documents by electronic means if the filing entity must file a return or document but owes no tax. This requirement will apply to all filing entities, including third party bulk filers, regardless of their annual tax liability. More information about the requirement to E-file zero tax due returns will be forthcoming.